By Dashan Hendricks
Last weekend, Phillip Paulwell, Jamaica's Energy Minister, told the country that Venezuela, despite its economic woes, has re-committed itself to supplying oil to Jamaica and other Caribbean countries under the Petrocaribe Agreement. Besides that, he said an oil well has been dedicated to supplying oil for these countries.
Petrocaribe countries will also have access to a US$200 million grant for renewable projects to reduce their dependence on imported oil.
But one wonders if, in all good conscience, Jamaica and other countries can continue to accept the benevolence of the Venezuelans while their economy continues to perform worse than ours.
First, for Jamaica, which spends over US$2 billion on oil imports annually, the deferred oil payments under the PetroCaribe arrangement effectively provide some US$500 million in balance-of-payment support annually. That has helped to reduce the pace of depreciation of the currency since there is less demand for U.S. dollar to buy oil. It has also reduced the amount of money that Jamaica has to borrow to finance the deficit. No one can argue against those benefits.
But with Venezuela cash strapped with food shortages and the world's highest inflation rate juggling multiple exchange rates, can Jamaica continue to look towards that country for its benevolence. Other examples of the country's financial crisis is shown in the fact that Venezuelan President Nicolas Maduro is looking for financing, after prices for its crude, which accounts for 95 per cent of the nation’s exports, have slipped 49 percent since June. Mr. Maduro is also in talks to swap 1.4 million ounces of the country’s gold reserves for US$1.5 billion.
Dr. Peter Phillips, Jamaica’s Finance Minister, reportedly revealed in an interview on March 11, that Jamaica is in talks with financial institutions on a deal to buy back the debt it owes Venezuela the oil program.
I am in no way advocating here for Jamaica to walk away from the Petrocaribe Agreement. But when Venezuela is providing a US$200 million grant - that is free money – that is a country that is cash strapped, one has to wonder where our conscience will kick in.
Recall that the Venezuelans late last year began talks with financial institutions to sell the Jamaican debt for money to run their country. An estimate from U.S. banking group JPMorgan Chase & Co. claims Jamaica's Petrocaribe debt may be as much as US$3.8 billion. The proposal is to sell that debt. If Jamaica gets the same discount, given to the Dominican Republic when its debt was sold in January, then our debt will be sold for US$1.8 billion.
While one understands why the Venezuelans are providing the money (that is to reduce our dependence on importing oil from them while deferring part of the payment) I would shy away from accepting money which that country desperately needs, itself.
If Venezuela is willing to accept deep discounts for billions of dollars in debt to raise critical funds, what business do we have in accepting their money, much less doing so for free?
Jamaica has a project to have 30% of its electricity generated from renewable sources by 2030, and several projects to reduce the use of oil to generate electricity in the next two years. What should be done is that these projects should be strengthened. Private investors should be wooed to put them in place.
Accepting free money from a cash-strapped country is only prolonging a "beggar thy neighbour" policy. It's just a re-run of our unashamed boasts of the amount of grants in the budget. Those I have never been proud of, because it’s money that is begged to run our country.
rjrnewsonline.com
Dashan Hendricks is RJR's Group Business Editor
